Labor: Farmed fish swimming strong

Posted: Tuesday, October 14, 2003

For Alaska salmon fishers facing hard times, it's no secret farmed fish from abroad have chewed a huge hole in domestic and foreign markets the Alaska product used to dominate.

An analysis of the impacts published recently by the Alaska Department of Labor and Workforce Development shows just how hard the industry and Alaska's struggling economy have been hit.

The article, written by state labor economist Neal Gilbertsen and appearing in the October issue of Alaska Economic Trends, predicts the farmed salmon industry is likely to continue its worldwide influence.

Gilbertsen noted that while the economic crisis facing the industry was probably unavoidable, it also was predictable under the laws of supply and demand.

"Farmed salmon created a major new source of supply on the world market," he said. "As the global supply of farmed salmon increased, prices fell. Alaska's relative share of the world production declined and its ability to influence prices retreated. By the late 1990s, the Alaska salmon industry lacked both the supply and the market demand to significantly affect prices."

Here's what economists know has happened based on the effects of measurable quantities, such as the numbers of fishers, boats, permits, fish, and, most importantly, prices.

The number of fishers plying Alaska's waters for salmon plummeted 37 percent between 1990 and 2002, according to Gilbertsen. In actual numbers, that's a fall from 10,487 salmon fishers to 6,567.

During the same period, the metric ton yield of wild salmon and its value to fishers also declined dramatically. In 1990, according to Gilbertsen, the harvest hit 302,600 metric tons worth $559 million. That had fallen to 238,000 metric tons in 2002, a catch worth just $130 million.

An important aspect of the overall decline was that prices were falling faster than harvest numbers. Gilbertsen noted that prices went from record highs in 1988 to record lows in 2002.

"Processors, in an attempt to remain competitive with farmed fish on world markets, lowered wholesale prices, which translated into lower prices for fishermen," he said.

That had a cascade effect on important peripheral elements of the fishing industry. As fish prices dropped, so did the value of fishers' investments in boats, gear and permits, Gilbertsen said.

According to statistics from the Commer-cial Fisheries Entry Commission noted in the Trends article, the estimated market value of valid limited entry permits in 1990 was almost $1.25 billion.

"By 2002, estimates placed the value of the remaining 11,421 permits at $204 million," Gilbertsen said.

In other words, the value of all valid salmon permits had crashed by 84 percent, a statistic probably matched by the fall in the value of vessels, he said. Another way of looking at it is to say the value of a generic salmon permit fell by $91,347.

"This loss of equity, which for self-employed fishermen is equivalent to retirement accounts, will continue to reverberate throughout the Alaska economy in coming years," Gilbertsen said.

Coastal communities have felt the impact. The reduction in the number of actively fishing permit-holders resulted in a decline in crew jobs and shore-based employment. Monthly employment in the state's seafood processing industry fell from 11,200 in 1992 to 7,400 in 2002, according to Gilbertsen.

The impact of farmed salmon on world markets is largely to blame, he said. Farmed salmon has several key advantages. Pen-reared fish are available to the market year round, quality control is better, the supply is predictable and production can be planned to meet anticipated levels of demand, he said.

Chile and Canada are the two major suppliers of the U.S. domestic market.

Canada is close to American markets and is a partner in the North American Free Trade Agreement, which removed certain trade barriers, Gilbertsen said.

Chile has fewer environmental regulations and cheap labor. For instance, the average monthly salmon industry wage in Chile in 2001 was $199 (U.S.), and eight out of every 10 workers earned $133 a month. Meanwhile, U.S. minimum wage laws ensured American workers earned an average of $2,100 a month in 2001, Gilbertsen said.

Farmed fish also made serious inroads into salmon markets abroad. In the period from 1990 to 1995, the annual sale of Alaska salmon to Japan amounted to more than $1 billion a year, hitting $1.56 billion in 1992. Since then, annual sales have fallen 55 percent in value, coming in at $707.8 million in 2002, according to Trends.

By comparison, Chile was selling 160,000 metric tons of farmed salmon to Japan by 2001 meeting 70 percent of the Japanese demand. Japan bought 45 percent of Chile's production that year the same year that the U.S. bought 38 percent, according to Trends.

The farmed salmon industry has enjoyed a meteoric rise. According to Trends, farmed salmon accounted for only 1 percent of the world's production in 1980. By 2002, it accounted for three out of every five fish. The farmed salmon supply "effectively sets the world price of salmon," Gilbertsen said.

Atlantic pen-reared fish represented the greater percentage of U.S. imports in 2002, and Chile and Canada accounted for 94 percent of those 187,357 metric tons fish worth $818 million.

"The fact that Canada is a NAFTA partner, and that the U.S. has just approved a bilateral free trade agreement with Chile, would seem to indicate that these imports will continue to grow," Gilbertsen said.

While much of the world, including the domestic market in the United States, was developing a taste for farmed salmon, Alaska resisted the global trend, he said.

"For a variety of political as well as biological and environmental reasons, Alaska has adopted legislation that prohibits salmon farming," he said. "With or without Alaska's participation, the industry will continue to grow, and farmed salmon will continue to dominate both world markets and prices."

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